Pancyprian Accounting cheat sheet

Accounting equation: Assets = Liabilities + Equity; every transaction preserves this equality, so double entry always keeps debits equal to credits.

IAS 1 requires a complete set of financial statements: statement of financial position, statement of profit or loss and OCI, statement of changes in equity, statement of cash flows, and notes.

Accrual basis: revenue is recognised when the performance obligation is satisfied, expenses when incurred, regardless of cash movement; prepayments are assets, accruals are liabilities.

Depreciation methods: straight line = (cost − residual value) / useful life; reducing balance = carrying amount × rate; units of production = (cost − residual) × units used / total units.

Inventory under IAS 2 is measured at the lower of cost and net realisable value; cost includes purchase price, import duties, transport and conversion costs, and excludes abnormal waste.

Cost formulas permitted by IAS 2 are FIFO and weighted average cost; LIFO is prohibited under IFRS.

IAS 16 revaluation model: carrying amount is fair value at revaluation date less subsequent depreciation and impairment; increases go to OCI and a revaluation surplus, decreases are expensed unless reversing a prior surplus.

IFRS 15 five steps: identify the contract, identify performance obligations, determine the transaction price, allocate the price to obligations, recognise revenue when each obligation is satisfied.

Impairment under IAS 36: an asset is impaired when carrying amount exceeds recoverable amount, which is the higher of fair value less costs of disposal and value in use.

Prime cost = direct materials + direct labour + direct expenses; conversion cost = direct labour + production overhead; production cost = prime cost + production overhead.

High-low method: variable cost per unit = (cost at high activity − cost at low activity) / (high activity − low activity); fixed cost = total cost − variable cost per unit × activity.

Contribution = sales − variable costs; profit = contribution − fixed costs; break-even units = fixed costs / contribution per unit; break-even revenue = fixed costs / contribution-to-sales ratio.

Margin of safety = actual or budgeted sales − break-even sales, expressed in units, revenue, or as a percentage of budgeted sales.

Under absorption costing profit differs from marginal costing profit by the change in inventory volume × fixed overhead absorption rate per unit.

Overhead absorption rate = budgeted overhead / budgeted absorption base (labour hours, machine hours, or direct labour cost); over-absorption is credited, under-absorption is debited to the costing profit and loss.

Standard costing variances: material price = (standard price − actual price) × actual quantity; material usage = (standard quantity − actual quantity) × standard price; labour efficiency = (standard hours − actual hours) × standard rate.

Relevant cost rules: sunk costs and committed fixed costs are irrelevant; opportunity cost is relevant; a special order is accepted when incremental revenue exceeds incremental cost.

Process costing: abnormal loss is valued at full production cost and written off; abnormal gain is valued at full cost and credited to the process account; equivalent units weight work in progress by degree of completion.

Cyprus corporate income tax rate is 12.5% for resident companies; temporary increased rates apply to certain shipping and to groups under the global minimum tax rules.

Cyprus tax residence for companies is based on management and control exercised in Cyprus; resident companies are taxed on worldwide income, non-residents on Cyprus-source income only.

Tax-exempt income includes dividends received (subject to conditions), profits from disposal of securities, and interest income arising from the ordinary course of business.

Notional interest deduction on new equity introduced into a Cyprus company is allowed at a rate equal to the yield on the 10-year Cyprus government bond plus a premium, subject to conditions.

Cyprus personal income tax is progressive: 0% up to €19,500, 20% to €28,000, 25% to €36,300, 30% to €60,000, and 35% above €60,000.

Social insurance contributions are shared between employer and employee on capped insurable earnings; the General Healthcare System (GESY) contribution applies to payroll and other income.

VAT standard rate in Cyprus is 19%, with reduced rates of 9%, 5%, and 3% for specified supplies; registration is compulsory above the turnover threshold.

Capital gains tax at 20% applies to gains on disposal of immovable property situated in Cyprus and on shares in companies owning such property, with lifetime exemptions and indexation.

Defence contribution applies to certain passive income such as interest and rents received by Cyprus tax residents, at rates that differ for individuals and companies.

ISA 200: reasonable assurance is a high but not absolute level of assurance; the auditor expresses an opinion on whether financial statements are prepared, in all material respects, in accordance with the applicable framework.

ISA 315 requires the auditor to identify and assess risks of material misstatement at the financial statement and assertion level, including inherent and control risk.

Audit risk model: audit risk = inherent risk × control risk × detection risk; detection risk is controlled by the auditor through the nature, timing, and extent of procedures.

Assertions about classes of transactions include occurrence, completeness, accuracy, cut-off, classification; about balances: existence, rights and obligations, completeness, valuation and allocation.

ISA 700 unmodified opinion states the financial statements give a true and fair view; modified opinions under ISA 705 are qualified, adverse, or disclaimer.

ISA 570 going concern: the auditor evaluates management's assessment for at least twelve months from the reporting date and discloses material uncertainty in a separate section.

ISA 240 fraud: the auditor is responsible for obtaining reasonable assurance that the statements are free from material misstatement due to fraud or error, not for preventing fraud.

Materiality under ISA 320 is set at overall financial statement level and at performance materiality below it; it is a matter of professional judgement.

Independence under the IESBA Code requires the auditor to be free from self-interest, self-review, advocacy, familiarity, and intimidation threats, or to apply safeguards.

Cyprus companies are incorporated under the Companies Law, Cap. 113; the company becomes a separate legal person on registration, distinct from its shareholders (Salomon principle).

A private company limits membership to 50, restricts share transfers, and prohibits public offers of shares; a public company may offer shares to the public.

Directors owe fiduciary duties: act in good faith in the company's interests, exercise powers for proper purposes, avoid conflicts of interest, and act with due care and skill.

Share capital terms: authorised capital is the maximum the company may issue; issued capital is what has been allotted; paid-up capital is what has been received.

A company may reduce capital, pay dividends, or provide financial assistance only in accordance with the statutory procedure, generally requiring solvency statements and shareholder approval.

Contract essentials: offer, acceptance, consideration, intention to create legal relations, capacity, and legality; a minor's contracts are generally voidable.

Agency arises by express or implied appointment, ratification, or necessity; the principal is bound by acts of an agent acting within actual or apparent authority.

Wrongful trading and fraudulent trading provisions allow the court to hold directors personally liable for debts incurred when insolvency was known or ought to have been known.

Under the Companies Law, annual returns and audited financial statements must be filed with the Registrar of Companies within the prescribed deadlines.

Net present value = present value of cash inflows − initial investment; accept projects with positive NPV; NPV is the preferred appraisal method because it measures absolute value added.

Internal rate of return is the discount rate at which NPV = 0; accept when IRR exceeds the cost of capital; IRR can mislead with non-conventional cash flows or mutually exclusive projects.

Payback period ignores cash flows after the cut-off and the time value of money; discounted payback corrects the latter but not the former.

Weighted average cost of capital = (E/V) × Ke + (D/V) × Kd × (1 − tax rate), using market values for equity and debt.

Cost of equity via CAPM = risk-free rate + beta × (market return − risk-free rate); via dividend growth model = (D1 / P0) + g.

Working capital cycle = inventory days + receivable days − payable days; a shorter cycle reduces the financing requirement.

Operating gearing is the proportion of fixed to variable costs; financial gearing is debt relative to equity, measured by debt/equity or interest cover.

Dividend policy theories include residual theory, Modigliani-Miller irrelevance, and the bird-in-hand and signalling arguments; in practice dividends are sticky and smoothed.

An accounting information system comprises people, procedures, data, software, and hardware; its outputs feed internal management reporting and external financial statements.

Segregation of duties in IT: the developer, the operator, and the user of a system should not be the same person; access rights follow least-privilege principles.

Input controls include validation checks (range, format, check digit, reasonableness) and batch controls (control totals, hash totals, record counts).

Processing controls include run-to-run totals, file reconciliation, and exception reports; output controls include distribution logs and review of master file changes.

General IT controls cover access security, change management, backup and recovery, and physical security; application controls cover the processing of specific transactions.

ERP systems integrate modules on a single database, which improves data consistency but concentrates risk, so master file change logs and user access reviews are essential.

Cloud accounting raises assurance issues: reliance on the provider's controls, data residency, availability, and the need for service organisation reports (e.g. SOC reports).

Computer-assisted audit techniques include data analytics, test data, parallel simulation, and embedded audit modules to test large volumes of transactions.

IESBA fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour.

The conceptual framework requires identifying threats (self-interest, self-review, advocacy, familiarity, intimidation) and evaluating safeguards or declining the engagement.

Confidentiality continues after the professional relationship ends; disclosure is permitted only when required by law or authorised by the client.

Independence in appearance as well as in fact is required for audit engagements; long association of senior personnel creates familiarity threats mitigated by rotation.

Corporate governance codes separate the roles of chair and chief executive, require independent non-executive directors, and mandate audit and remuneration committees.

The audit committee oversees the external audit, reviews the financial reporting process, and monitors internal control and risk management.

Whistleblowing arrangements and a documented code of conduct are core elements of an effective ethical control environment.

Fees: contingent fees create self-interest threats and are generally prohibited for audit engagements; low-balling creates a self-interest threat to quality.